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Wednesday, April 01, 2009

WaMu staff promised retention bonuses may be hit by 90% tax

Hundreds Washington Mutual employees were promised bonuses if they stayed to help the transition to JPMorgan Chase now face punitive taxes imposed by our senators and representatives.
Senator Maria Cantwell is greeting them with the top tax rate of 35% in S.561.*
Tax cheater Honorable Charles Rangel will tax the higher middle-income ones at 90%. H.R.1586* has passed the House and is now in the Senate. A two-income family receiving this bonus could pass the $250,000 cut-off and get the rest taken away. Let's look at a family with two people making $90k each where one is a WaMu employee in the transition for 12 months.

The WaMu employee's bonus equals that pay for the transition - $90k more. So the family income would make $270k - once only. So they would lose 90% of the amount over $250k in addition to all the regular taxes, just when they need the cash to survive being unemployed for months. The employee could have left months ago when the job market was better, but stayed to help and now gets clobbered by the new owner - Congress.

Hundreds of former Washington Mutual employees, expected to lose their jobs this year after working temporarily as part of JPMorgan Chase's transition team, could get winged by the congressional shotgun blast aimed at recouping multimillion-dollar bonuses paid to executives at insurance giant American International Group.
That's because the retention bonuses JPMorgan Chase promised those workers to get them to stick around would be taxed heavily under either of two bills in the Senate.
[...] After word of the AIG bonuses spread, an outraged House quickly passed a bill aimed at recovering them.
Ninety percent tax -- The measure, now in the Senate, would slap a 90 percent tax on bonuses given to employees of companies that received more than $5 billion in federal bailout money (including JPMorgan Chase).
The tax would apply to all workers whose household adjusted gross income exceeds $250,000.
The Senate also is considering another version. That bill — whose co-sponsors include Sen. Maria Cantwell, D-Wash. — would impose a 35 percent tax but apply to a wider range of banks and financial-services companies.
Some 4,200 people worked at WaMu's downtown Seattle headquarters when the thrift was acquired by JPMorgan Chase late last year. More than 1,500 of those workers have been laid off; 1,900 or so were asked to stay on temporarily but are to be let go this year.
Those transitional workers are accruing a retention bonus equal to their regular pay rate. They get the bonus when they're laid off.
With severance pay and a spouse's salary added in, "... You could easily have a year where a family hit the $250K mark for the first time in their lives ... only to have it confiscated by the federal government in a recession where we need that money to survive a long job search," another WaMu employee wrote in an e-mail.